| Tue 8 May 2007, 9:26 | | PPC - PPC Announces a Solid Interim Performance |
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PPC
PPC
PPC - PPC Announces a Solid Interim Performance
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC
ISIN: ZAE000005559
Media Release - PPC announces a solid interim performance
PPC announced a solid set of results today in spite of feeling some of the
pressures of rising costs as a result of operating at full capacity, input cost
pressures, the rigours of importing cement and the increased logistics
complexities to keep customers supplied.
The strong market conditions resulted in group revenue increasing by 19% to R2.6
billion whilst operating profit rose 15% to R987 million and headline earnings
per share improved 17% on the prior year.
Although operating margins during the period came under some pressure as a
result of these factors, operating cash flow before working capital requirements
exceeded R1 billion. In view of the results and the strong cash flow, the
directors have declared an increased interim dividend of 385 cents per share
(2006: 330 cents per share).
"Almost 200 000 tons of bagged Surebuild cement was imported at little or no
margin during the period," says John Gomersall, chief executive officer. "In
addition significant increases in coal and diesel energy costs, higher operating
costs of older less efficient plant as well as the inability to fully optimize
distribution logistics and factory sourcing, during periods of very high demand,
have eroded operating margins."
"The domestic cement market grew by over 12% compared with the same period last
year, despite the impact of continued interest rate increases easing the pace of
growth in the private residential sector," continued Gomersall. "The continued
growth in demand is largely a consequence of the public sector investment in
infrastructure rapidly materialising and the early effect of a number of 2010
Soccer World Cup projects which are already underway," he added.
Gomersall however cautions, "We don`t anticipate that this double-digit demand
growth will continue, as the middle and upper housing market is showing
increasing signs of cooling and we therefore expect demand to grow by around
8% for the second half of the financial year. In addition much of the major
infrastructure spend will span many years, power stations, being a case in
point, where we are probably looking at 10 to 15 year time frames. I personally
believe that some of the recent claims of major cement shortages developing over
the next few years to 2010 are somewhat over-sensationalised," he added.
Capital expenditure, related mainly to the Batsweledi expansion project at
Dwaalboom and completion of the Jupiter re-commissioning project, amounted to
R372 million (2006: R188 million) during the period.
"The good news is, that our 1.25 million tons per annum Batsweledi project is
progressing according to plan and within budget, whilst work has commenced on
the Hercules cement mill upgrade and expansion project at Pretoria which is
expected to be commissioned in the middle of 2009. This should bring some
welcome relief to the market," says Gomersall.
The planning and design of the 1.25 million tons per annum Riebeeck expansion
and modernisation project, in the Western Cape, and the related Environmental
Impact Assessment process are also progressing well.
The company`s Broad Based Black Economic Empowerment (BBBEE) sub-committee has
commenced detailed negotiations with the strategic partners who are likely to
participate in the company`s broad based black equity transaction. The
empowerment transaction once complete, will incorporate these strategic partners
as well as construction sector associations, employees, and members of the
communities in which the company operates, and will effectively place 15% of the
company`s equity in the hands of black people. PPC plans to complete the
transaction by around the end of the current financial year.
"Funding for the transaction will incorporate a combination of owner equity,
third party institutional loans and vendor facilitation by PPC," says Gomersall.
Barloworld anticipates releasing shortly the salient dates relating to the
finalisation of the unbundling of its shareholding in PPC.
Commenting further on PPC`s prospects, Gomersall added that the Jupiter kiln is
likely to continue operation after the commissioning of the new Batsweledi kiln
line, early next year, and will assist in providing further cement capacity to
the market.
"While the overall market conditions bode well for cement demand the increased
cost of sourcing and moving cement and clinker, both internally and externally,
will continue to impact on the rate of earnings growth achievable until the
additional capacity from the current expansion projects becomes available," says
Gomersall.
"Nonetheless, the company should continue to report a good performance and
strong operating cash flows for the full year," says Gomersall.
08 May 2007
Sponsor: J.P.Morgan Equities Limited
Date: 08/05/2007 09:26:45 Produced by the JSE SENS Department.
